With the coming of a new year, some changes are planned for
our internet and cable systems. First,
we are pleased to announce that we will be increasing our speeds for our
internet services within the coming weeks.
We will be providing this improvement at no additional cost to our
customers, and will notify our customers when this change is complete and ready
for our customers to enjoy.

The end of 2017 brings us to the implementation of our
decision to drop WSMV, WTVF, and possibly WHAS from our cable television
lineup. This is not a decision we look forward to carrying out, but it was made
necessary by the continuing cost increases demanded by the networks and the
broadcast stations that affiliate with them.

Every three years we must negotiate a new carriage agreement
with each of the broadcast television stations we carry on our system. The
broadcasters are able to charge us for carrying their programming because the
companies that own them successfully convinced our Congress to pass laws which
give them the right to do so. This was an outright gift to the broadcasters by
our elected representatives. They made it legal for this transfer of wealth
from our customers to distant broadcast television stations, and that is not
even the worst of the laws relative to your cable service.

We are also legally required to carry the network
programming (ABC, NBC, CBS, Fox) from the Bowling Green broadcast stations
instead of being allowed to choose broadcast sources in Nashville or Louisville.
So, our decision is not based just on the payment demands of WSMV, WTVF, and
WHAS. It is also based on what we are required to pay WBKO and WNKY in order to
offer ABC, NBC, CBS & FOX programming. Those payments to the Bowling Green
broadcasters set up the financial situation where we felt that many of our
customers just would not want to pay the additional cost of maintaining duplicate
broadcast stations over the next three-year contract period.

This is obviously not a unanimous decision, as we have heard
from some customers that they would rather pay the extra than lose the
Nashville and Louisville stations. Rather, it seems to be another situation
wherein the community is divided between those that want rates as low as
possible, and those willing to pay the additional cost to maintain the
programming status quo. In light of this division, our Programming Committee
and Board of Directors, made the difficult decision to drop some channels to
keep rates low.

But that does not mean that those willing to pay more to keep access to the
Nashville and Louisville channels are without options. Much of the local news
and weather that many enjoy from WTVF, WSMV, WHAS, and other broadcast
stations, is actually available using internet streaming technology from Roku,
Amazon, Apple, and other sources - and the coming free internet speed upgrade
will help provide a more stable platform for this option! Roku devices are particularly easy to use and
inexpensive to buy (less than $40). We’ve created a video primer on buying,
installing, and setting up these devices and you can access that video at https://www.youtube.com/watch?v=Y_rCZeN_yD8&feature=youtu.be
. We will even show it at various times on Cable 6, so you can get more
comfortable with this option for continuing to enjoy programming from distant
broadcast stations.

The final decision on the fate of WHAS will be made before
January 10. We are awaiting another meeting of the EPB Board and hoping for
some additional price concession by the WHAS folks. We will keep you posted on
the decision about whether WHAS will remain on our system very soon.With the coming of a new year, some changes are planned for our internet and cable systems.

E.P.B. Electric Customers on the Variable Price Rate- We predict the POSSIBILITY for December's peak electric demand to occur on Thursday, December 28th between 7am & 1pm. This is only a prediction based upon our best guess as to what the combination of all customers in Glasgow will demand from T.V.A. A peak demand hour can occur during any of the maximum of 24 hours of each month during one of our predicted peaks. This is our forecast which is provided as a convenience for E.P.B. customers who wish to receive forecasts. If you want to move to a fixed energy rate without coincident peak demand charges, please contact us at 270-651-8341.

We’ve reached the end of another year
that has included many accomplishments, as well as a big helping of
frustrations. Everyone on the EPB team is reflecting on a year in which we completed
big projects on behalf of our customers, and tentatively looking forward to
some years of great change rolling our way due to upcoming retirements, and
continued turmoil in the electric power and broadband industries. None of us is
likely to lament the passing of 2017, but we also have some fear of the ghost
of Christmas future!

We still have the controversial cable
television issue of parting ways with our old friends – WSMV, WTVF, and WHAS on
December 31, and none of us looks forward to that, even though it is a result
of the greed of the broadcasters, which we have no way to blunt other than
ending our relationship with them. These are the things that negatively impact
the holiday spirit of my team, and I repeat my request that, if and when you
get a chance to do so, please take a minute to tell any EPB team member that
you see that you are proud of them. They could really use the encouragement
right now.

The meeting will be a bit long, so try
to grab a snack before you arrive. Now, let’s move on to this month’s agenda!

January 1
FCA

As we enter the third year of our new retail rate designs, January 1
will bring us another small decrease in overall power cost due to a small
decrease in the FCA. Since energy sales have been off slightly, compared to
what TVA anticipated, and since hydro capacity has been higher than projected, fuel
costs were lower, and that is the root cause of the smallish FCA decrease. The
January 2017 FCA is going to decrease about 0.7% to 1.812 cents per kWh. As
usual, I am attaching the narrative on the FCA from the TVA portal. On January 1,
the energy component of our retail rates will be adjusted to reflect this decrease
to the wholesale cost of energy.

At the meeting, I will have a summary of the bids and a
recommendation for purchases for your consideration.

Programming
Committee Member Replacements/Actions/Rates

The terms of Terrell
Alexander and Beverly Vance expire at the end of January. Terrell is finishing
his first full term. Beverly was appointed to fill the unexpired term of Janice
Crenshaw, so she hasn’t served two full
terms yet. The board has been limiting these appointments to two full terms, so
you have some options, and, of course, the two full terms limitation is one
previous boards have created and can be modified. Both of these folks have been
great members of the committee, but you should be pondering their replacement,
or reappointment, between now and the board meeting in January.

Joint Pole
Use Agreement with Kentucky Wired

Over the last five years we have had on-again and off-again conversations
with the Commonwealth of Kentucky regarding former Governor Beshear’s plan to
build a fiber network throughout the state. During those years, our state
government threw tons of money at consultants to help them figure out how to
design and construct a network capable of connecting all state agencies,
schools, libraries, and local governments. The goal is to serve government with
government-owned facilities so as to save money compared to the fees presently
charged by AT&T, Windstream, and the like, for these connections.

It is not my place to critique this plan. It has been my place to
negotiate an acceptable agreement with the Commonwealth to allow them to access
their targeted locations in Glasgow by using the poles we own. It is that which
brings this item to the agenda for the upcoming meeting. After countless hours
of discussion among EPB, City of Glasgow, and the Commonwealth, we have finally
produced a proposed agreement which will allow the construction of the Kentucky
Wired network to proceed in our territory. A copy of that agreement is attached
for your review. I will suggest that you approve this agreement at the meeting
so we can get it executed by both parties and out of our hair.

Progress on Advisory Council Recommendations

Since you all have
already been provided a summary of the findings and recommendations of the
Council, I won’t repeat all here in their entirety, but will use shorter
summary terms for each item. The information presented here will be repeated
and expounded upon at the meeting for your consideration.

1. Tiered Customer Charge Based Upon Usage. This
is the toughest one of the recommendations for us to make progress on, but we
did discuss it enough to target a $5 reduction in the customer charge for the
lowest usage “tier,” as recommended by the Advisory Council. I’m afraid that
this decision has been misinterpreted by some as a promise to lower all
customer charges by $5. The Council asked for a tiered customer charge with
reduction for the lower kWh usage customers. That is the job we are working on
as directed to my team at the August Board meeting. Additionally, TVA is going
to start charging us a new wholesale customer charge, and since our present
rate architecture collects all of the money we need to operate the grid from
the customer charge, the base customer charge will have to cover this new
expense. That is not even recognizing the possible $400,000 annual cost
increase that Kentucky Retirement might saddle us with. A $5 credit would
soften those increases and provide the gradualism, as we slowly reduce that
credit over the next few years, but that credit will have to be funded by an
increase somewhere else. Please remember, the EPB is a non-profit corporation
which does not have the financial resources to simply reduce any charge without
offsetting that reduction with an increase to another charge to balance the
ledger. Our team will continue to develop the specifics of this recommendation
and update you monthly on our progress with the goal to accomplish same as
quickly as possible. At this point, we have made no new progress on this
pending the rate review discussed below.

2. Revisions to Variable Rate. The requested
revisions have already been implemented, effective August 1. The council asked
us to limit our peak predictions to a maximum of 4 days per month. Accepting
that recommendation causes us to move away from the technically elegant
architecture of the former infotricity rate, wherein everyone pays their
pro-rata share of the monthly peak hour, no matter when it occurs. The new
limitations we accepted create risk of paying TVA for a peak hour which is not
properly predicted and shared among all customers. That risk is monetary and we
must create a fund balance to use when those missed predictions occur, because
TVA must be paid regardless of the accuracy of our predictions.

3. Alternative Rate Considerations. This is one of
the most unusual recommendations from the Council. The suggestion here is that
we poll our customers (we assume just those actually using the Alternative Rate
- TRS and TGSA1) to ascertain their interest in modifying the rate to introduce
time-of-use elements to the rate. This feels odd because everyone we know that
went to the Alternative Rate, did so because they sought the solace and
simplicity of an old-style kWh rate with fixed kWh charges. Still, we agreed to
pursue each of the recommendations, and we are presently sending out a letter
to each customer on the TRS/TGSA1 rates to ask them for input on this question.
Responses to the letter are coming in and we will have a summary for you in January.

4. Improvement to RoundUp Product. The
recommendation here was quite simple. We were asked to modify the product such
that anyone interested in participating could choose a fixed amount to be
automatically added to their monthly bill and then donated to Community Relief.
The objective here seems to have been to gather more funds for the use of
Community Relief, by increasing the amount donated by a participant beyond the
sub-one dollar amount achieved by simple rounding up of the bill to the next highest
even dollar. We found that the software could easily be adapted to do this and
we have already accomplished this change. We still need to create marketing to
better inform the customers of this change, and that is in process.

5. Annual Rate Review. The recommendation was that
we conduct an annual review of the effectiveness of all retail rates, and
recommend changes based upon that review. This is a great suggestion that is
already on-going. In January we will have a presentation on rate effectiveness
based upon data from 2017 consumption and billing.

6. Expand Education Initiatives. This
recommendation is the one which surprised us the most. The Council recommended
that we use multiple media outlets and create a speaker bureau which would
allow us to provide energy usage and savings advice to a wide variety of
meetings and groups throughout Glasgow. Honestly, we felt we were already doing
that, and, a lot of the feedback we have been getting has been negative as many
folks feel they do not need to be educated. However, since we accepted this
recommendation, and since you instructed me to redouble our efforts to educate
our customers, we are on the case. We have already conducted, two full blown
educational sessions lead by Jeff Christian, a former director from Oak Ridge
National Laboratory, and someone considered to be an expert in the energy
efficiency field. The event was heavily advertised with special arrangements
for transportation via city bus and individual transport for those with
transportation needs. Mr. Christian did a fantastic job speaking at the two
forums on August 31, however, less than 30 total customers attended. Other
educational efforts will continue.

Bi-Annual
Write Offs

It is again time for us
to weigh the list of bad debts identified over the last six months and act to
move them to the write-off portion of our ledger. The list of the customers who
have taken our services, but failed to pay for them for the last six months
will be sent out when it is final (as of the writing of this narrative, they
are not complete). We will go over the details of how this year’s write-offs
compare to the past at the meeting.

Newer members of the board might
not even know what this is. Eleven years ago, a treasured member of the EPB
team, Jama Young, passed away, leaving a great void. As a way to honor her and
make sure that her spirit never passed, we created a foundation that is funded
by voluntary contributions by members of the EPB team. No public money is
involved in the RBG foundation.

RBG started off with a commitment
to WKU and its Gatton Academy of Mathematics and Science, of $50,000 to name
the community meeting room there after Jama. We met that commitment in three
years, and since then we have been involved in many similar projects, including
naming a room at Glasgow’s Boy and Girls Club building after another departed
team member – Janice Crenshaw, sponsoring the STEAM laboratory at Red Cross
Elementary, and making the Dolly Parton Imagination Library reality for Barren
County children.

The following report is from our
activities for 2017. I am very proud of my team’s work and its concern for
others as evidenced by the record of RBG Foundation.

For our
Christmas project this year, the RBG Foundation sponsored students from the
Glasgow and Barren County School systems. Our goal was to help students
at the middle and high school levels.

We “adopted” 8 students from BCMS, Trojan Academy, and
BCHS (7 boys and 1 girl). We were given lists of clothing sizes, along
with a wish list for each child. Many of these kids needed coats, shoes,
even underwear and socks. We were able to buy all of the clothing they
needed, as well as their wish list items. When I first talked to resource
center staff, they said these 8 stars had been waiting for a while. They
must have been waiting for us!

The money that was spent on Barren County students was
matched in a donation to the school resource office at GHS. Their
resource person takes needy students shopping and buys what they need.
There was one student from GHS that had been sleeping on the floor. The
school found a bed for her, but part of our donation was going toward buying
her sheets and bedding.

For $2900, we were able to make Christmas brighter for
several students and families in this community. What a blessing!

Of course, the RBG
Foundation would welcome your participation if you are interested. Please call
me if you want more details.

Recommendations and Superintendent’s
Opinion on EPB Pay and Benefits Plan for 2018

Each December we face the task of balancing our need to
compensate the EPB team fairly for their work on our behalf, against the
backdrop of a fairly-stagnant local economy in which wages and benefits have
remained low for several years. To accomplish this, we turn to a group of
eleven peer utilities (even though those peers are usually doing less for their
customers than our team, because, most of our peers do not offer the wide
variety of services that we offer) and use their Journeyman Lineman pay as a
guide for the annual update of our compensation plan.

I am proud of the way our team is walking our talk. Any
visit with folks from any of our peers, large or small, will result in the
realization that our folks are accomplishing things that are well ahead of what
they are doing – or even thinking about. That reality must flavor our
discussions of pay plan changes for 2018. If we want to continue to lead our
industry and provide cutting edge solutions for our community, we must continue
to invest in our human resources. They are equally important to our poles,
conductors, and substations.

The 46 members of the EPB team were the men and women
standing at the wall of the fort in 2016 and 2017 as we suffered unfair
criticism for becoming the first utility in the nation to implement a near
non-volumetric energy rate. They are battle weary, and bewildered that some in
the community have attacked them for their efforts to help the community, but
still they continue to accomplish our mission. Of course, we all know that 46
team members are not really enough to assure the accomplishment of our mission,
but we don’t want them to know that! We have a time-tested, successful formula
for compensating them and I am confident that we are doing the right thing this
year when I recommend a return to our time-tested formula for valuing their
service to the community.

With the maturing of our new rate architecture, we are confident
that the revenue to fund these additional expenses will be there for us. We
feel that many of the changes and investments you have allowed us to implement
over the last few years have the potential to reduce our expenses and improve
our economic stability. No matter what, we are going to need the trained
professionals that make up the EPB team if we are going to carry out our
mission, and continue to explore new worlds on behalf of our customers. This
recommended pay plan should be seen as essential maintenance on the human plant
which completes Glasgow’s grid.

With that explanation, we can get down to business on the
2018 pay plan review. When we queried the eleven other utilities we have been
measuring ourselves against this year, we found the average wage for Journeyman
Lineman is now $34.77 per hour. Our present rate is 3.9% behind this average.
This difference is higher than usual, but a close review of the survey result
reveals that a couple of our peers recognized the steep difference between
their Journeyman Lineman rate and their peers was causing the loss of trained
personnel, so they made a major pay adjustment. For those new to the Board, many
years ago the Board made a finding which established the relative value of EPB
jobs to the job of Journeyman Lineman. Since then we have continued to believe
in those relationships such that we value all of our jobs in a fixed proportion
to Journeyman Lineman. These relationships have been successfully utilized for
many, many years and we still deem them fair, accurate, and equitable.

I am recommending a 2.9% increase for our hourly positions,
which is below the level calculated from the survey. I think the full 3.9%
produced by the survey is too abrupt, and when considered along with the CPI
discussed below, the 2.9% I am recommending is more appropriate. While 2.9% is
still considerable, our struggle to find the right employees as we enter a time
of large numbers of experienced people leaving us, can only be won with our
tradition of fair and equitable pay and benefits.

A pay matrix is applied to each position, and we will
review these at the meeting. Each position is assigned a pay range, the median
of which is calculated from the Journeyman Lineman pay discussed above, with a
minimum, and maximum figure for each position. Progress through the range is
based upon the merit review of each employee’s performance during the year. These
ranges simply identify the range of salaries applicable to each job. Your
approval of these ranges does not mean that everyone, or anyone, gets a salary
change. It only keeps the value of the jobs current and gives us the boundaries
for each person’s pay, depending on their performance.

As we have discussed over the past few months, we are also
looking at significant retirements
within the near future, and a temporary increase in the overall payroll as we
reclassify and hire new personnel to replace those individuals who will be
leaving, is a reality.

In total, I am asking for a net $82,632 for compensation
cost increases in 2018 (since we had a Line Foreman resign in 2017, our
compensation costs for last year were dramatically reduced). This amount breaks
down to $41,326 for merit increases during the year, $70,930 for hourly and
apprentice wage increases, and a new net of $15,700 for projected increased
costs associated with hiring and reclassifying folks to replace those planning
to retire. These costs are offset by a $45,000 credit due to resignation this
year, producing the $82,600 net.

As you know, we have a state approved apprentice lineman
program which currently has two Apprentice Linemen enrolled. We also have three
folks in a technician apprentice program. This apprentice class is essential
for the EPB to meet its mission over the next couple of decades. We also plan
on starting new apprentices this year. All in, compensating this team as recommended
in 2018 will generate a net increase in our payroll of about 3.0% over what we
were approved to spend in 2017. But this does not tell the whole story. Our
work at attracting the SET project has, so far, paid over $260,000 in our
salary expenses as we charged out time to the project. This is something that
benefitted us, even though no one directed us to attempt to gain this funding.
This funding has already paid for about three years’ worth of our normal salary
increases.

As another valuable resource to be used in considering this
matter, we researched the CPI increase over the last year. According to the
Bureau of Labor Statistics web site, the increase for CPI-W (all wage earners
and clerical workers), US City Average, all Items was around 2.0% for the last
12 months. You can study this yourself by going to https://www.bls.gov/charts/consumer-price-index/consumer-price-index-by-category.htm and looking at the data summarized on the graph. This
information aligns closely to my recommended 2.9% adjustment recommendation for
wage and salary adjustments for 2018. I will recommend that you approve the 2018
Pay Plan as it is presented here.

While we are discussing
pay and benefits, it seems like a good time for a preliminary review of the EPB
Wellness Plan that we implemented early in 2014. You may recall that we talked
about this over a span of a couple of board meetings and finally implemented it
in January 2014, at an estimated annual cost of $16,085. Roughly $6,000 each
year, has been paid to Health Advocate to administer our plan, leaving about
$10,000 for employee incentives to make health improvements. A payment of $200
is made to each employee who completes four campaign objectives during the
year, one of which is submitting to a biometric screening.With a
small work force and little personnel redundancy, keeping a healthy team is
vital, and this Plan helps us with that objective. The 2017 effectiveness
report is not yet available, but should be ready for the January meeting. I
will give you the details then.

The last salary and
benefits issue is your normal annual evaluation of my performance and my pay,
which has not been done for 24 months. Although you normally ask me and the
press to leave the room as you deliberate on this, I do not believe (and Jeff
Herbert confirms this) that you can go into Executive Session just to consider
my performance in private (obviously you can kick me out of the room whenever
you wish).

For your information,
and such that I might not have to answer this question again during the
meeting, my salary is 106% of the proposed median for our Grade 1 range. A
straightforward way to evaluate my worth is to use the same system that I use
for everyone on the team. First, we conduct performance evaluations and reduce
the performance to a number based on this system of performance levels:

2.0 More than
meets the requirements for a competent experienced employee.

3.0 Meets
requirements for a competent experienced employee.

4.0 Meets
basic job requirements but below average for EPB personnel.

5.0 Required
more than minimum help from supervisor and others. Has potential to overcome
deficiencies and shows willingness to do so.

6.0 Performance
as a whole was below basic requirements or was deficient in one or more major
aspects. Employees at this level may be considered for remedial action, such as
termination.

Once a numeric score is
rendered, we use this merit matrix (provided below) to arrive at a recommended
salary adjustment. One axis is the percentage of the median and the other axis
is the numeric performance score. The point of intersection of those axes is
the amount.

I am furnishing this
just in case you want to streamline this process. You are in charge of this,
and you can skip it all together if you wish.

Conclusion

Well, that ought to be
more than enough to set your head to spinning for this month. Let me know if
you have any questions before the meeting.

E.P.B. Electric Customers on the Variable Price Rate- We predict the POSSIBILITY for December's peak electric demand to occur on Friday, December 15th between 7am & 1pm. This is only a prediction based upon our best guess as to what the combination of all customers in Glasgow will demand from T.V.A. A peak demand hour can occur during any of the maximum of 24 hours of each month during one of our predicted peaks. This is our forecast which is provided as a convenience for E.P.B. customers who wish to receive forecasts. If you want to move to a fixed energy rate without coincident peak demand charges, please contact us at 270-651-8341.

E.P.B. Electric Customers on the Variable Price Rate- We predict the POSSIBILITY for December's peak electric demand to occur on Wednesday, December 13th between 7am & 1pm. This is only a prediction based upon our best guess as to what the combination of all customers in Glasgow will demand from T.V.A. A peak demand hour can occur during any of the maximum of 24 hours of each month during one of our predicted peaks. This is our forecast which is provided as a convenience for E.P.B. customers who wish to receive forecasts. If you want to move to a fixed energy rate without coincident peak demand charges, please contact us at 270-651-8341.

E.P.B. Electric Customers on the Variable Price Rate- We predict the POSSIBILITY for December's peak electric demand to occur on Friday, December 8th between 7am & 1pm. This is only a prediction based upon our best guess as to what the combination of all customers in Glasgow will demand from T.V.A. A peak demand hour can occur during any of the maximum of 24 hours of each month during one of our predicted peaks. This is our forecast which is provided as a convenience for E.P.B. customers who wish to receive forecasts. If you want to move to a fixed energy rate without coincident peak demand charges, please contact us at 270-651-8341.